High Court Of Rajasthan
CIT vs. A.R. Enterprises (P) Ltd.
Sections 147, 148, 149
Asst. Year 1985-86, 1987-88
N.N. Mathur & D.N. Joshi, JJ.
IT Appeal Nos. 87 & 88 of 2001
22nd February, 2002
Counsel Appeared
L.M. Lodha, for the Appellant : Gajendra Maheshwari, for the Respondent
JUDGMENT
N.N. MATHUR, J.:
These two appeals filed under s. 260A of the IT Act, hereinafter referred to as ‘the Act’, arise out of the common order of the Tribunal dt. 27th April, 2001. The respondent-assessee M/s A.R. Enterprises (P) Ltd. Udaipur, is engaged in the business of drilling of tube-wells and construction activities. The respondent-assessee claimed investment allowance amounting to Rs. 5,25,885 on purchase of drilling rigs, which was allowed in the original assessment passed under s. 143(3) of the Act for the asst. yr. 1985-86 by order dt. 16th Dec., 1986. However, in absence of sufficient profit for that year, the same was carried forward and allowed to be set off against the income of the asst. yr. 1987-88. The Supreme Court in a decision rendered on 7th March, 1993, in CIT vs. Bhudhiraja (1993) 114 CTR (SC) 420 : (1993) 204 ITR 412 (SC) : TC 25R.185 held that the investment allowance on drilling rigs is not allowable. In view of the decision of the apex Court in Bhudhiraja’s case (supra), the assessing authority issued a notice under s. 148 of the Act in February, 1995 to the assessee to reopen the case under s. 147 of the Act. The AO completed the reassessment by assessment order dt. 15th March, 1995, and withdrew the investment allowance granted at the time of original assessment. The assessee preferred an appeal against the order of the AO to CIT(A). In the opinion of the CIT(A), the claim could have been disallowed by the AO at the time of original assessment, if he felt that the claim was inadmissible. But after lapse of four years, the provisions of s. 147 of the Act could not be invoked merely on the basis of decision of the apex Court as the initial condition for issuing the notice under s. 147 of the Act is that the assessee failed to disclose fully and truly all material facts necessary for assessment. The CIT(A) found that it was not the case of the Revenue that the assessee did not disclose a particular fact at the time of original assessment. Accordingly, the CIT(A) concluded that the notice issued under s. 147/148 of the Act was not in accordance with the law. Accordingly, he cancelled the reassessment order dt. 19th Oct., 1995. The Revenue preferred an appeal before the Tribunal, which was also dismissed by the impugned judgment, dt. 27th April, 2001.
Assailing the judgment of the Tribunal, it is contended by Mr. L.M. Lodha, learned counsel for the Revenue, that by claiming investment allowance on item where it was not allowable by law, the assessee has failed to disclose fully and truly all material facts. Thus, it was a case of escaped assessment under cl. (d) of Expln. 1 appended to s. 147 of the Act. It is further submitted that the word ‘information’ employed in s. 147(b) includes ‘information’ as to the true and correct state of law and so would cover ‘information’ as to relevant judicial decision. It is further submitted that the assessing authority has rightly treated the subsequent Supreme Court decision in N.C.
Bhudhiraja’s case (supra) as a ‘information’. Learned counsel has placed reliance on a decision of the apex Court in Maharaja Kumar Kamal Singh vs. CIT AIR 1959 SC 257 : TC 51R.1317. On the other hand, it is submitted by Mr. Gajendra Maheshwari, learned counsel appearing for the respondent-assessee that the reopening of assessment completed under s. 143(3) of the Act in consequence to the Supreme Court decision is permitted only within a period of four years from the date of end of the relevant assessment year, if there is an omission of failure as mentioned in cl. (a) of s. 147 of the Act. It is submitted that there is not a word in the reassessment about the assessee’s failure to disclose the material fact, therefore, the CIT(A) was justified in cancelling the reassessment made by the AO after a period of four years. Learned counsel has placed reliance on a celebrated judgments of the apex Court in Calcutta Discount Company Ltd. vs. ITO (1961) 41 ITR 191 (SC) : TC 51R.779 and Associated Stone Industries (Kotah) Ltd. vs. CIT (1997) 138 CTR (SC) 260 : (1997) 224 ITR 560 (SC) : TC S51.4051.
Before dealing with the contentions advanced by learned counsel for the parties, it may be apposite to refer to the relevant provisions of law. The material part of ss. 147, 148 and 149 prior to the amendment w.e.f. 1st April, 1989, reads as follows : “147. Income escaping assessment.—If (a) the AO has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under s. 139 for any assessment year to the AO or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or (b) Notwithstanding that there has been no omission or failure as mentioned in cl. (a) on the part of the assessee, the AO has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year. he may, subject to the provisions of ss. 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in ss. 148 to 153 referred to as the relevant assessment year). Explanation 1.—For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely : (a) where income chargeable to tax has been underassessed; or (b) where such income has been assessed at too low a rate; or (c) where such income has been made the subject of excessive relief under this Act or under the Indian IT Act, 1922 (11 of 1922); or (d) where excessive loss or depreciation allowance has been computed. Explanation 2…………… Issue of notice where income has escaped assessment…… Time-limit for notice.—(1) No notice under s. 148 shall be issued. (a) in cases falling under cl. (a) of s. 147…. (i) for the relevant assessment year, if….. (ii) for the relevant assessment year….. (b) in cases falling under cl. (b) of s. 147, at any time after the expiry of four years from the end of the relevant assessment year. (2)…… (3)……”
4. We have referred to ss. 147, 148 and 149 of the Act, as in the instant case, the reassessment notice was served in February, 1995. The provisions of ss. 147, 148 and 149 were applicable w.e.f. 1st April, 1989. The Department has also not disputed that the law amended from 1st April, 1989 is applicable in the present case. Sec. 147 deals with the income escaping assessment. Clause (a) deals with two situations; firstly where there is an omission or failure on the part of an assessee in submitting a return under s. 139 for any assessment year and secondly the income chargeable to tax escaped assessment for that year for the reasons of omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment for that year. Clause (b) provides that even if there is no omission or failure as provided under cl. (a) on the part of the assessee, still if the AO receives an information which makes him to believe that the income chargeable to tax has escaped for any assessment year, he may, subject to the provisions of ss. 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance. Expln. 1 appended to s. 147 enumerates the instances which shall be deemed to be the cases of escaped assessment. Sec. 148 provides for issue of notice where income has escaped assessment. Sec. 149 prescribes time-limit for notice. It prohibits an issue of notice under s. 148 in a case falling under cl. (b) of s. 147, at any time after the expiry of four years from the end of the relevant assessment year. Thus, it is evident that in a case which falls under cl. (b) of s. 147 i.e., where the AO intends to issue a notice in consequence to information in his possession, which led him to believe that the income chargeable to tax has escaped assessment, the limitation provided is of four years. As far as cl. (a) of s. 147 is concerned, admittedly the first part of clause is not attracted, as it is not a case of omission or failure on the part of the assessee to make a return under s. 139. As far as the second part of cl. (a) of s. 147 is concerned, it is now well settled that the duty of the assessee is only to disclose fully and truly all material facts necessary for his assessment for the relevant year. The expression “material facts” refers only to the primary facts. There is no duty cast on the assessee to indicate or draw the attention of the AO to what factual or legal or other inferences can be drawn from the primary facts. Relying on the decision of the apex Court in Calcutta Discount Company Ltd.’s case (supra), the apex Court in a later decision viz.; Associated Stone Industries (Kotah) Ltd.’s (supra), held that the duty of the assessee is only to fully and truly disclose all material facts. Explaining the expression “material facts” as contained in s. 34(1)(a), the Court observed that it refers only to the primary facts and duty of the assessee is to disclose such primary facts. The Court further observed that there is no duty cast on the assessee to indicate or draw the attention of the ITO as to what factual or legal or other inferences can be drawn from the primary facts disclosed. There is not a word in the order of assessment if the respondent-assessee omitted to disclose any material fact. Turning to cl. (b) of s. 147 of the Act, irrespective of the fact that there has been no omission or failure as provided under cl. (a), the AO in consequence to information in his possession can still consider a case of escaped assessment for any assessment year. The word ‘information’ has been explained by the apex Court in Maharaja Kumar Kamal Singh’s case (supra). It is observed that the word ‘information’ in s. 34(1)(b) includes the information as to the true and correct state of law and so would cover information as to the relevant judicial decision. Even in consequence of such an ‘information’, no notice under s. 148 can be issued because of the time-limit of four years as provided under cl. (b) of s. 149 i.e., at any time after the expiry of four years from the end of the relevant assessment year. There appears to be a public policy behind providing such a limitation that there must be point of finality in the legal proceedings and the stale issue should not be reactivated beyond a particular stage and that lapse of time must induce repose in set at rest judicial and quasi judicial controversies as it must be in other spheres of human activity. Reference be made to Parshura M. Pottery Works Corporate Ltd. vs. ITO 1977 CTR (SC) 32 : (1977) 106
ITR 1 (SC) : TC 51R.1141.
So far as the Income-tax Appeal No. 88/2001 for the asst. yr. 1987-88 is concerned, it does not survive as it is consequential order of the asst. yr. 1985-86.
We are satisfied that the case does not involve any substantial question of law and, as such, both the appeals are rejected.
[Citation : 255 ITR 121]
